Regionalist momentum in the Southern cone

Latin American Challenges

Regionalist Momentum in the Southern Cone by Mark Falcoff

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ews from the southern South American republics is a bit like news from nowhere. Most Americans have only the vaguest idea of where these places are, and they end up on the front page only when there is some way of tying them in to U.S. policy or interests, which is not very often. In a way, this is not surprising. Historically, Argentina and Uruguay have been more closely associated with Western Europe than with the United States. Chile, in spite of long-standing U.S. involvement in its mining industry, has always maintained a remarkably diversified pattern of international trade, and its political life, at least superficially, was more nearly like that of Italy or France than that of neighboring Bolivia or Peru. Consequently, Americans, whose Latin American experience is usually restricted to Mexico (if that), often express astonishment, when visiting the region for the first time, at how “European” it is. And if they stay long enough, they are struck by the major differences between Argentina and Chile— differences that (apart from language) are almost as great as those between Germany and France. Ten hours’ flying time from New York, however, is a rather high price to pay for a geography lesson, so it is hardly surprising that this region— called the “Southern Cone” because of its peculiar shape on the map—is so little known. The Land of Juan and Eva Pero ´n It is ironic that the recent mini-boom of American awareness of Argentina is mainly the result of an atrocious but commercially successful film on the life of its former first lady, Eva Duarte de Pero´n. A hundred years ago the country had more serious and sober claims to our attention. With an Mark Falcoff is a resident scholar at the American Enterprise Institute, contributing editor of Orbis, and author of many books and articles on the Southern Cone republics, including Modern Chile, 1970 – 89: A Critical History (Transaction Publishers, 1989) and A Tale of Two Policies: U.S. Relations with the Argentina Junta, 1976 – 83 (Foreign Policy Research Institute, 1989).

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FALCOFF economic growth rate unmatched anywhere in Latin America, it was regarded as the emerging power of the south, a kind of Latin American United States. Some of the similarities were striking, particularly the fact that the motors of its development were export agriculture, its openness to European investment and technology, and its population, which was largely of European immigrant extraction. This made it, along with Uruguay, the only really “white” country in Latin America (for whatever that might have been worth). For many decades Argentines believed in the future of their country and eagerly challenged the United States at international forums. What is more, thanks to their close commercial relationship with the British Empire, they were often in a position to do so. Neutrality in both world wars made the Argentines rich, and their peso was for years one of the world’s strongest currencies. The story has it that by 1945 the Central Bank in Buenos Aires had accumulated so much gold from the country’s agro-export transactions that the ingots had to be piled in the hallways. The high point of Argentine prosperity and self-confidence was probably reached in the three to four years following the Second World War, and since that time the country has experienced a slow but steady economic decline. One could argue that the past fifty years of Argentine history have been marked largely by a search for effortless prosperity and lost social concord—a search that has so far proven fruitless. Understandably, the causes of Argentina’s decline—as well as its lost international status— have been the subject of a vast literature, both domestic and foreign.1 No single explanation is fully satisfactory. Conservatives have preferred to point fingers at the huge, largely unproductive public sector created under General Juan Pero´n (1946 –55), as well as an excessively politicized labor movement. Liberals and leftists have preferred to cast blame upon either the Argentine armed forces, whose leaders governed the country with no great skill for long stretches after 1955, or upon a selfish “oligarchy” of ranchers-cum-lawyers working in collusion with British and American imperialists to keep the country backward, or some combination of the two. In reality, many of Argentina’s troubles are due to events over which no Argentine, or for that matter any confabulation of Wall Street or City of London bankers, had much control: namely, the decline of Britain as a great power, and with it, the disappearance of markets reserved by imperial 1 See, for example, Carlos Dı´az-Alejandro, Essays on the Economic History of the Argentine Republic (New Haven: Yale University Press, 1970); Carlos Waisman, Reversal of Development in Argentina: Postwar Counterrevolutionary Policies and Their Structural Consequences (Princeton, N.J.: Princeton University Press, 1987); and Gary W. Wynia, Argentina in the Postwar Era: Politics and Economic Policy Making in a Divided Society (Albuquerque: University of New Mexico Press, 1978). For a taste of the more polemical literature, see Donald C. Hodges, Argentina, 1943–76: The National Revolution and Resistance (Albuquerque: University of New Mexico Press, 1976 and subsequent editions), a kind of Trotskyite-Peronist interpretation; or Roberto Aizcorbe, Argentina: The Peronist Myth (Hicksville, N.Y.: Exposition Press, 1975), an elegy to the supposed glories of the pre-Peronist era. In Spanish, of course, there are whole libraries devoted to the topic.

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The Southern Cone preference, combined with the simultaneous the growth of European agricultural self-sufficiency through the creation of a common market.2 In effect, since about 1952 Argentina has never been able to find the kind of clients for its agricultural exports that it enjoyed in its heyday, and the attempt to develop an industrial base of its own ran up against other difficulties such as a shortage of energy, competition from Brazil and other larger-scale economies, an outdated educational system, and a penchant for investing heavily in inefficient and unproductive state enterprises. In the end, the country was always forced to fall back on comparative advantage. The problem, however, was that while agro-export earnings were never enough to restore the glittering days of the 1930s or ’40s, they were still the country’s best bet for economic survival. This dilemma eventually undermined the credibility of every government—Peronist and anti-Peronist, civilian and military, democratic and dictatorial—right up to the present. Argentina’s latest misfortune has been the collapse of the Soviet Union, which until the late 1980s took as much as 60 percent of its cereal exports and paid for them in carefully hoarded dollars, pounds sterling, and other hard currencies. The combination of economic stagnation and the loss of international status, both relative and absolute, produced some bizarre political consequences. From the 1950s through the early 1980s the country’s leaders— often active members of the military—sought compensation in confrontation with outside powers (Brazil, Chile, the United States, Great Britain).3 In nationalist circles, both civilian and military, there was much talk of Argentina Potencia. For many years a major war with Brazil was the chief strategic hypothesis of Argentine military schools, and both countries engaged not only in an arms race, but also the quest for nuclear credibility. (Both refused to subscribe to the Treaty of Tlatelolco, the Latin American version of the Nonproliferation Treaty.) The quarrel with Chile, apparently over possession of three tiny islands in the Strait of Magellan, was really about whether Argentina’s transAndean neighbor should have something well beyond Argentina’s reach, namely, a two-ocean navy. (A common slogan on window decals of Argentine automobiles in the late 1970s read, “Argentina in the Atlantic, Chile in the Pacific.”) In spite of its Ruritanian flavor, the controversy was no laughing matter: the Argentine generals brought their country virtually to the threshold of war with Chile in 1978, and only dire threats from Washington (the exact content of which remains unknown) and the prospect of facing Chile’s professionally superior army averted a conflict—literally at the last minute. Confrontation with the United States came naturally to Argentines. 2 While Argentina was not formally a member of the British Empire, from the Great Depression through the Second World War it was folded into the Ottawa system of imperial preference through an explicit agreement reached in 1933, the so-called Roca-Runciman Pact. 3 Edward S. Milenky, Argentina’s Foreign Policies (Boulder, Colo.: Westview Press, 1978).

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FALCOFF U.S. agricultural protectionism closed American markets to Argentine exports in the 1920s, and competition in the international cereal market assured a tense and problematic relationship in the best of times.4 Dislike and distrust of America and Americans was common on both ends of the political spectrum—a combination of jealousy and cultural contempt a` la franc¸aise on the Right, of jealousy and Third Worldism on the Left. Argentina’s convoluted political scene, with Peronists and anti-Peronists virtually at daggers’ edges for more than two decades, and weak civilian regimes punctuated (and truncated) by periodic military governments, left Washington with little to choose from. Indeed, even under right-wing juntas claiming to be anticommunist, Argentina’s voting record at the United Nations strongly resembled that of leftist regimes elsewhere in the Third World, particularly on issues of interest to the United States. When the armed forces seized power in 1976 and unleashed a wave of repression with a ferocity and extent hitherto unknown anywhere in Latin America, they unknowingly simplified the task of defining U.S. interests. Argentina became, in fact, the centerpiece of the Carter administration’s new human rights policy, and bad relations became good politics in both countries. The Soviet invasion of Afghanistan in 1979 and the Carter administration’s hastily hatched grain embargo suddenly revealed the limits of its Argentine policy, and in fact President Carter himself was planning to mend his fences with the generals after his reelection, an event, of course, that never took place.5 Carter’s replacement by President Ronald Reagan was viewed in Buenos Aires as a new era in U.S.-Argentine relations, and indeed for a brief period it was. Military-to-military relations, long frozen, were carefully resumed, and President General Roberto Viola and his successor General Leopoldo Galtieri were received with all honors in Washington. One sign of the new cordiality was Argentine willingness to lend a hand in Central America, where the new administration was still hamstrung by congressional restrictions on providing military assistance to the beleaguered governments of El Salvador and Honduras and the nascent anti-Sandinista counterrevolution in Nicaragua. Unfortunately for the Argentine generals, U.S. gratitude did not translate into concrete economic benefits, and growing unrest over unemployment and inflation led to a revival of political demonstrations for the first time in years. Partly in an attempt to neutralize domestic unrest, 4 A very interesting work by Carlos Escude´, Gran Bretan ˜ a, Estados Unidos y la declinacio´n Argentina, 1942– 49 (Great Britain, the United States, and Argentina’s Decline, 1942– 49) (Buenos Aires: Editorial del Belgrano, 1983), drawing almost exclusively on declassified British and American materials, argues that Argentina’s anti-U.S. foreign policy under Peron in the late 1940s led to costly retaliation by Washington, namely, exclusion of Argentine agricultural exports from the U.S.-sponsored European Recovery Program. 5 See Mark Falcoff, A Tale of Two Policies: U.S. Relations with the Argentine Junta, 1976 – 83 (Philadelphia: Foreign Policy Research Institute, 1989), pp. 22–25.

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The Southern Cone General Galtieri took a supremely audacious leap and sent an invasion force to recover the Falkland (Malvinas) Islands. Roughly three hundred miles east of the tip of Patagonia and nearly three hours’ flying time by jet from Buenos Aires, the Malvinas are an icy, windswept archipelago— hardly the sort of place one would expect to attract the interest of Argentines, a supremely urban, even metropolitan people. In fact, the islands are populated by a handful of hardy British settlers and many more penguins. However, the archipelago belonged to Argentina until the early nineteenth century, and its recovery had long been a principal desideratum on the national agenda. The decline of British power seemed to suggest a gradual devolution by default, and various postwar London governments actually explored the possibility—always to run up against the settlers, who were hostile to anything Argentine, and a well-placed and well-financed Falkland Islands lobby. General Galtieri’s gamble was that the British were no longer in a position to protect their interests half a world away, and he almost guessed right. Unfortunately for him, the prime minister of the day, Margaret Thatcher, was a woman of iron determination—and one who had domestic political problems of her own, which recovery of the islands had the potential to neutralize. An expeditionary force was cobbled together in record time and dispatched to recover the islands, which it did with remarkable dispatch. After a moment’s hesitation, the Reagan administration supported the British—as any student of Atlantic politics might well have predicted it would—revealing just how thin the new Argentine-American alliance really was.6 The impact of the defeat of the Argentine army in the field by an enemy that was, to say the least, geographically disadvantaged, had a devastating long-term impact on Argentine politics. The military was revealed to be incompetent not only to run the country but even to pursue its narrow professional mission. The short-term result was to force Galtieri’s resignation and the calling of elections, but the longer-term outcome was even more significant. The Argentine armed forces, the country’s most important power brokers since 1930, were forced to retire definitively from the political arena. All three branches have been subject to radical downsizing, conscription has been abolished, and effective civilian control established for the first time in over sixty years. The reestablishment of democracy in Argentina on the first really solid bases since the 1920s has had important consequences for Argentina’s foreign relations. The nuclear program has been dismantled and Buenos Aires has subscribed to the Tlatelolco nonproliferation treaty. Buenos Aires gracefully accepted the finding of a papal mediator to the effect that the islands in Tierra 6 A particularly fascinating look into decision making during the war in London, Washington, and Buenos Aires comes from a book of interviews with policymakers in all three cities by Michael Charlton, The Little Platoon: Diplomacy and the Falklands Dispute (Oxford: Basil Blackwell, 1989).

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FALCOFF del Fuego belong to Chile. The growth of economic regionalism (see below) has superseded traditional rivalries with all of Argentina’s neighbors. The arms race in the southern cone has effectively come to an end, though perhaps more for reasons of economic stringency than a strict remission of geopolitical rivalry.7 Among other things, both Argentina’s and Brazil’s vaunted military industries have entered into receivership. Relations with the United States have steadily improved, moderately under Radical president Rau´l Alfonsı´n (1983– 89) and then conspicuously under the Peronist Carlos Menem (1989 –99). Perhaps the most emblematic example was the latter’s dispatch of three warships to the allied fleet during the Gulf War, the only such contribution by a Latin American country. This decision was remarkable in that it represented a departure from Argentina’s long tradition of isolation and neutrality in world conflicts. The United States has also specifically expressed its appreciation for the Argentine contribution to peacekeeping missions in Haiti, Bosnia, and the Sinai. President Menem even supported the U.S. position on Cuba for a time in the early 1990s, until he succumbed to domestic and regional pressures, although he did—along with Chilean president Eduardo Frei Ruiz-Tagle—absent himself from the 1999 summit of Ibero-American leaders in Havana.8 Perhaps the strongest indicator of the shift towards Good relations warmer relations with the United States has been the fact that with the U.S. the newly elected government of Radical president Fernando are now a vote- de la Rua has affirmed that it will largely continue Menem’s winning agenda friendly posture. This is all the more remarkable because, during the previous administration, many Radical leaders in Argentina. were harshly critical of the country’s supposed subservience to Washington. Even the new government’s most left-wing member, Vice President Carlos Alvarez, has emphatically stated that good relations with the United States are now a vote-winning agenda in Argentina, in sharp contrast to times past.9 7 The recent decision of the Clinton administration to lift the ban on the sale of high-tech supersonic aircraft in South America pleased no one. Theoretically, no single power was favored, but in fact the penniless Argentines were irritated that the more prosperous Chileans, who had the money to replace their fleet of outdated French Mirages, were likely to do so, even though it was by no means foreordained that they would buy U.S. equipment. As for the Chileans, they were angered and upset that the United States awarded Argentina the status of a major non-NATO ally—presumably a consolation prize for its inability to take advantage of the new opportunity to purchase U.S.-built supersonic aircraft. For their part, the ever-touchy Brazilians regarded the decision as a “provocation to Brazil,” though why the United States should want to provoke Brazil (or even, why Brazil was important enough to want to provoke) is a huge mystery. 8 Menem’s position was that Argentina was staying away from the Havana meeting not so much out of distaste for the government there as in support of its neighbor Chile, whose government boycotted the meeting to protest Spain’s attempt to extradite former dictator Augusto Pinochet, who was being detained by British authorities in London for violation of the International Convention on Torture. 9 He could not help adding that this was because “the United States has changed; it no longer supports dictatorships in Latin America.” Statement made at a meeting of the Inter-American Dialogue in Washington, August 1999.

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The Southern Cone To be sure, this does not mean smooth sailing on all fronts in the U.S.-Argentine relationship. Although the Clinton administration—much to its credit— has lifted the decades-old ban on the importation of Argentine beef, and although the two countries have formed a common front against the European Union in defense of genetically altered crops, Argentina’s inability to enact a world-class intellectual property law has led to considerable tension with American pharmaceutical companies, since many of their drugs are being produced by Argentine firms without proper respect for patents. For their part, Argentines continue to protest against the huge, congressionally approved subsidies for such U.S. exports as wheat and sugar, which put Argentine producers at an artificial disadvantage in the world agricultural market. Compared to the nettlesome political, military, and diplomatic differences of the past, however, these kinds of problems (far from uncommon in Latin America) should almost be a relief to policymakers. The greatest changes in Argentina in recent years, however, have been economic rather than political or diplomatic. Assuming office in a moment of national panic and hyperinflation (1989), President Menem embarked upon a drastic economic reform that did away with what might be called corporatist Argentina. The country put up for sale some of its largest and most expensive white elephants—a 1937 state-of-the-art telephone system, electrical power plants, the state airlines, and even the state oil company, long a sacred cow for nationalists of all hues. The withdrawal of the state from large sectors of the economy has led to a return of Argentine capital abroad and massive new foreign investment. Much of the country’s energy and communications network has been modernized, leapfrogging as many as ten generations of technology. At the same time, the partial privatization of the pension system has created domestic capital markets for the first time since the 1920s (formerly both the Argentine state and private sector had to borrow abroad to finance their operations). One indicator of the depth of the change is the availability, for the first time since about 1940, of fixed-rate home mortgages (until recently, all real estate sales—large or small—were cash transactions). These reforms, however, have not come without a price. They have dramatically impoverished the country’s middle class—the largest in Latin America—revealing the extent to which it has always been dependent upon bureaucratic preferments or employment in private companies with a privileged link to the government. The political consequences of this phenomenon have so far been limited to voting Menem’s Peronist party out of office in October 1999, but it remains to be seen whether the new government of President de la Rua, a coalition of centrist and leftist parties and groupings, will be able to avoid a similar fate. Apart from massive privatization, the other great economic change has been the emergence of Brazil as Argentina’s most important customer and, largely as a result, its political and strategic lodestar. In a way, this is Summer 2000

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FALCOFF rather paradoxical, since Brazil itself is far behind Argentina on the curve of economic reform, is a much less socially integrated society, and suffers from a disorganized and often incoherent political system. On the other hand, the sheer size of the Brazilian economy— often cited as the eighth, ninth, or tenth largest in the world, depending on the year—and the existence of perhaps as many as 60 million people with near–“First World” purchasing power, dazzles foreign investors and has lured literally scores of billions of dollars in new investment into the country over the last ten years. Brazil’s importance to Argentina these days can hardly be underestimated, since it is the country’s number one consumer of agricultural products. On the other hand, Brazil’s rather cavalier attitude towards its currency— which stands in strong contrast to Argentina’s rigid and disciplined dollarization—periodically exposes its Argentine neighbors to threats of devaluation.10 Such a devaluation did in fact occur in January 1999, throwing Argentina into a recession almost literally overnight, from which it has yet to recover. Argentina’s close economic relationship with Brazil has strong political and diplomatic implications. These two countries, along with Uruguay and Paraguay, are members of Mercosur (Mercado Comu´n del Sur, or the Common Market of the South), a regional trading bloc that is supposed to grow into something much larger. Passports issued to citizens of member countries already bear a Mercosur stamp at the top (in obvious imitation of the European Union). Leaders of the member states make no secret of their plans for eventual political, military, and cultural integration. There has even been talk lately of a common currency (that would certainly not be the U.S. dollar). In reality, Mercosur (called Mercosul in Brazil) is Brazil’s attempt to draw its immediate neighbors firmly into its sphere of influence and to act as an alternative to the United States as a pole of attraction.11 This is an ambitious project, but for the moment at least, seems less so in light of the reluctance of Washington to expand membership in the North American Free Trade Agreement (NAFTA) even to relatively small and unthreatening economies such as Chile’s. Meanwhile, Argentina has little choice but to draw closer politically to its principal market. At the same time, however, the country seems to have mortgaged its future to a questionable proposition, namely, that Brazil will emerge as an economic superpower on a par with the United States or the European Union. But given the physical and economic limitations of geography, it currently lacks any alternative. 10 The term “dollarization” is used here rather loosely. In effect, the government has established a currency board that regulates the supply of pesos based on the number of dollars in the Central Bank’s vaults. There has been some discussion of formal dollarization—that is, abandoning Argentina’s own currency altogether— but for the moment this has been put on the back burner. 11 In this sense it appeals greatly to those Argentines who miss the old “nonalignment” of the past, with Brazil taking the place of the former Soviet Union in diplomatic as well as economic terms.

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The Southern Cone The Land of Allende . . . and Pinochet If Evita Pero´n is the best-known Argentine around the world, the most famous Chilean is probably its late Socialist president Salvador Allende (1970 –73). Taking office with little more than one-third of the popular vote, Allende allowed himself to be swept away by the ideological delusions of the period and a coterie of advisers close to Cuban dictator Fidel Castro. In due course the country was thrown into chaos, hyperinflation, and a condition of near– civil war, and Allende himself was contemplating resignation when he was overthrown by his own military chiefs. (He committed suicide in the presidential palace as the troops converged upon the building.) Ironically, he owes much of his retroactive prestige to the actions of his successor, General Augusto Pinochet, whose barbarous treatment of Allende’s collaborators and supporters— over a thousand “disappeared” into graves still unknown, and many more cruelly tortured and exiled— has crowned three years of socialist misrule with an unexpected nimbus of martyrdom. The subsequent revelation that the United States had a hand in matters has added spice to the sauce, at least for anti-Americans around the world.12 An even greater irony is the fact that, during Pinochet’s sixteen years of stern military dictatorship, the Chilean economy, which by 1973 had the largest public sector in Latin America after Cuba’s, was drastically revamped by a team of economists trained at the University of Chicago. The result was a sustained period of economic growth, both qualitative and quantitative, the likes of which Chile had not known since the First World War. So dramatic was the turnaround, in fact, that by 1991 every country in Latin America except Cuba was poring over the Chilean experience. Studying along—much to the horror of the local Communist Party and its sympathizers—was the former Soviet Union, which had previously been thought of as the Promised Land of the Chilean Left. If Pinochet expected gratitude for these achievements, he must have been sorely disappointed. For in a plebiscite convoked in late 1988 to determine whether his people would approve an additional eight-year term in office (with the possibility of another eight years after that) he was soundly defeated by a hitherto unimaginable coalition of centrist and leftist forces.13 However, once Pinochet was gone, his Socialist and Christian Democratic 12 See Paul Sigmund, The United States and Democracy in Chile (New York: Twentieth Century Fund, 1993), esp. pp. 48 – 84; and Nathaniel Davis, The Last Two Years of Salvador Allende (Ithaca, N.Y.: Cornell University Press, 1985). Davis served as U.S. ambassador to Chile during the period mentioned in the title of his book. See also Mark Falcoff, Modern Chile, 1970 – 89: A Critical History (New Brunswick, N.J.: Transaction Publishers, 1989), esp. pp. 199 –250. 13 This coalition, which is still governing Chile, is also an unexpected creation of the Pinochet dictatorship. It is made up of Christian Democrats and Socialists, both of whom were literally at each other’s throats on the last day of the Allende regime. It took political persecution of an extremely crude kind to bring these former enemies together.

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FALCOFF opponents were faced with the task of governing Chile. As a result, almost overnight, critics of the free-market economic model were discovering its virtues, and over the ten years since the return of democracy virtually no changes have been made in the broad thrust of economic policy. The controversies that have shaken the country since then have been narrowly political: to what extent Chilean politicians should recover civilian control of the military; in what ways (if any) Pinochet’s 1980 constitution should be amended; even whether Chile should finally legalize divorce (it is the only Western country that currently refuses to recognize such). To be sure, the center of the storm has to do with the validity (or invalidity) of the Chilean military’s “self-amnesty,” which is to say, the restrictions on the reach of civilian courts in matters relating to alleged crimes by members of the armed forces, and lately, the question of whether General Pinochet himself—finally returned after a long period of house arrest near London—should face prosecution. Theoretically, the election of economist Ricardo Lagos, a socialist, to the presidency of Chile in December 1999 should bring these sensitive issues to the fore. Those who know the country well, however, are not so certain. Lagos’s right-wing opponent, Joaquı´n Lavı´n, did so well in the first round of voting in November (he actually bested Lagos’s score by a couple of points), that for the first time the leading candidates were forced into a runoff. Lagos prevailed, thanks to the support of the Communists and other small parties, as well as the return of some conservative Christian Democrats who had apparently deserted the coalition ticket in the first round. Even so, Lavı´n came perilously close to 50 percent of the vote. While some of the latter’s success may have derived largely from the normal exhaustion of popularity of the ruling Christian Democratic–Socialist coalition after ten years in power, it also suggests that Chile is a rather more conservative country than many foreigners like to think. Lagos—a shrewd and able politician—surely knows as much and is likely to proceed with considerable circumspection, at least where economic issues are concerned. Although the new Chilean president does not deny his association with Allende— on the day of the coup, he was slated to become Chile’s ambassador to the Soviet Union— he does affirm that he and the late president “live in different worlds.” This is undoubtedly true: ideologically, Lagos is far closer to Britain’s Tony Blair or Germany’s Gerhard Schro¨der than to any historic icon of the Latin American Left. In and of itself that speaks volumes on the distance the country has traveled since it was almost literally on the verge of civil war a little more than twenty-five years ago. Chile’s relations with the United States have always been complex.14 14 For a brief but comprehensive treatment by two senior Chilean diplomats, see Heraldo Mun˜oz and Carlos Portales, Una amistad esquiva: las relaciones de Estados Unidos y Chile (An Ambivalent Friendship: Relations between the United States and Chile) (Santiago: Editorial Pehue´n, 1987).

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The Southern Cone A small and isolated South American country sharing long boundaries with Argentina and Peru— both with irredentist claims to its national territory— Chile has historically reached outside the region to counterbalance its somewhat unfavorable geopolitical situation. In the nineteenth century it was a close ally of Britain (and to some extent remains so15) and to a lesser degree of the United States in the twentieth.16 From the time of the First World War, the United States was the country’s principal investor (largely in the mining industry) and creditor. It also exercised a strong influence in military, scientific, and academic circles—though never as strong as many Americans imagined. The presence of two large, imaginatively led Marxist parties (one of them clearly allied to the Soviet Union) and the challenge of Fidel Castro’s revolution in Cuba led the United States to invest heavily— both financially and otherwise—in the Christian Democratic experiment of Eduardo Frei Montalva’s presidency (1964 –70). The election of Salvador Allende was greeted by consternation and worse in Washington, and during the three years of Popular Unity (1970 –73), the United States played a major role in keeping opposition parties alive. The coup itself was no surprise to Washington, nor indeed to most Chileans, but the particular form that it took revealed a barbarous side of the country’s political culture that few people could have anticipated. During the early years of the Pinochet regime, the United States contented itself with the knowledge that a Marxist experiment had been defenestrated before it had the opportunity to consolidate power, however high the human cost. By the mid-1970s, however, Pinochet’s secret police were so emboldened as to operate beyond Chilean soil. The murder of former foreign minister Orlando Letelier in Washington and former army commander General Carlos Prats and his wife in Buenos Aires, as well as a failed attempt to assassinate former Christian Democratic politician Bernardo Leighton and his wife in Rome, drew international attention to the nature of the regime, and also put pressure on Washington to distance itself from Santiago. Along with Argentina, Chile became a major target of the Carter administration’s human rights campaign, with rather indifferent results. Pinochet’s sound economic policies led to an unexpected boom, and many European countries, while deploring Chile’s political system, were perfectly happy to take advantage of the congressionally mandated U.S. arms embargo (the Humphrey-Kennedy Act of 1976) to sell the country high-tech weaponry. 15 As Baroness Thatcher, the former British prime minister, recently revealed in her defense of General Augusto Pinochet, the latter had provided Britain with valuable facilities in the war over the Falklands. Although this information could hardly be news to cognoscenti on either side of the Atlantic, that a former British prime minister would blurt it out in public shocked many people in both Chile and Argentina. 16 Chile’s position in the Second World War was more favorable to the United States than Argentina’s, but not outstandingly so. See Michael Francis, The Limits of Hegemony: United States Relations with Argentina and Chile during World War II (Notre Dame, Ind.: University of Notre Dame Press, 1977).

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FALCOFF The very fact of Chile’s geographical isolation and its diverse pattern of international commerce insulated it somewhat from foreign pressures, and it benefited as well from the Sino-Soviet split: by persecuting Chile’s Moscowleaning Communist Party, Pinochet attracted the ardent support of Beijing. As it did with Argentina, the Reagan administration took office determined to mend its fences with Chile, but had no Falklands war to bring matters to a head. For his part, Pinochet assumed that Reagan’s conciliatory attitude constituted a blank check from the United States, instead of what it really was: an invitation to hasten the process of political normalization. By the mid-1980s, there was acute disappointment in Washington that “quiet diplomacy” yielded no results, and eventually the administration— goaded by a Democratic Congress and the human rights community— distanced itself from the Chilean regime and even to some extent encouraged its moderate opposition. The volte-face of an administration as obviously anticommunist as Reagan’s had a bracing effect in Chile, demoralizing the government and emphasizing its international isolation. A long-planned plebiscite on Pinochet’s continued rule in 1988 led to the invasion of an army of foreign observers who fanned out over the length and breadth of the country to ensure an accurate result. The defeat of the dictatorship—56 to 44 percent—set the stage for a transition that in many ways Incorporating continues to this day. Chile into U.S. relations with Chile’s two democratic governNAFTA would ments since 1989 have been rather low-key and uneventful. The country experienced a new wave of American investserve U.S. ment, particularly in forest products, financial services, cominterests. munications, and viticulture. The arms embargo was also lifted, and military-to-military relations resumed slowly. But in the face of a firmly centrist Christian Democratic–Socialist coalition government, the United States remained largely disengaged from Chile’s political life for the first time in decades. By virtue of its vigorous, booming, free-market economy, Chile expected to be the first South American country to conclude a free-trade agreement with the United States, but the high political price paid by the Clinton administration with its labor constituency to ratify the NAFTA dampened enthusiasm in Washington for further adventures of this sort. Chile’s admission to an enlarged NAFTA was therefore postponed sine die—a humiliation that has not been forgotten by the country’s political and economic elite, and which led it to search elsewhere. Originally cool to Mercosur, Chile has become an associate member and the new Lagos administration claims to be interested in full membership. However, Chile’s tariffs are considerably lower than those of Brazil, and many technical problems need to be worked out. At the same time, Chile’s trade patterns, with an important Asian component, are different from the Mercosur nations. In light of these issues, Chile would probably accept NAFTA membership were it offered by the next U.S. administration. 428

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The Southern Cone In theory, Chile need not choose between Mercosur and a trade agreement with the United States (or with NAFTA). But in fact, the geopolitical realities behind Brazil’s project for the Southern Cone would surely require something of the sort. In any event, unlike Argentina, Chile’s mix of exports is such that it stands to benefit more from association with the United States, Mexico, and Canada than with the Mercosur states. Incorporation of Chile into NAFTA would also serve U.S. interests by demonstrating that priority is being given not to market size, but to the quality of a country’s economic management—a lesson that cannot be taught too often. The Land of Battle y Ordo ´n ˜ ez Tiny Uruguay, sometimes called the “Switzerland of South America,” is really a long-detached Argentine province, or as one Argentine politician once quipped to me, “Uruguay is Argentina without the superego.” Created as a buffer state between Argentina and Brazil in the 1830s—largely through the good offices of the British, who were loath to see either of the regional powers dominate both sides of the River Plate estuary—Uruguay has long followed its own path in many areas.17 Though drawn from the same ethnic stock as Argentines, pronouncing Spanish with the same distinctive accent, looking to Europe with the same wistful intensity, and producing and exporting the same agricultural and pastoral products, Uruguayans are more democratic, more egalitarian, and far more anticlerical. They are also more urban than even the Argentines: fully a third of the population lives in the capital of Montevideo or its immediate environs. Historically, Uruguayans have displayed a firm commitment to civilian political institutions, and in fact their only experience with authoritarianism in recent years was a brief military government (1973– 83) when such were the fashion all over South America. For the most part Uruguayans have avoided the acute social conflicts that have periodically divided Argentina and Chile, thanks to an elaborate European-style welfare state established in the early days of the century by a remarkable statesman and visionary, President Jose´ Battle y Ordo´n˜ez (1903–7, 1911–15). In contrast to Argentina, Uruguay was vigorously proAllied in both world wars. During the more repressive phase of General Pero´n’s first period of power (1946 –55), Uruguay offered refuge to many of the Argentine strongman’s political opponents. Because its economy has long 17 See M. H. J. Finch, A Political Economy of Uruguay Since 1870 (London: Macmillan, 1981); Roberto Ares Pons, Uruguay: provincia o nacion? (Uruguay: Province or Nation?) (Montevideo: Ediciones del Nuevo Mundo, 1967); R. H. Fitzgibbon, Uruguay: Portrait of a Democracy (New Brunswick, N.J.: Rutgers University Press, 1954); Milton Vanger, Jose´ Battle y Ordo´n ˜ ez of Uruguay: The Creator of His Times, 1902–1907 (Cambridge, Mass.: Harvard University Press, 1963); and Martin Weinstein, Uruguay: The Politics of Failure (Westport, Conn.: Greenwood Press, 1975).

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FALCOFF been dominated by agro-pastoral exports, it has suffered from many of the same postwar disabilities as Argentina. However, its elaborate system of entitlements (which at one time included retirement with full pay at age forty) has been even more effective in undermining economic growth than the Peronist-corporatist system across the river. What is perhaps most remarkable about Uruguay is the degree to which its people remain largely impervious to the costs of an economy dominated by a hemorrhaging public sector and unrealistically generous social benefits. Although the three administrations elected since the return to democracy in the mid-1980s have valiantly attempted to convince their people of the need for market-oriented economic reform, they have failed. Uruguay is the only Latin American republic signally to reject the concept of privatization—in a plebiscite, no less. The result is that the country is kept afloat by tourism (Argentines and Brazilians flock to its beaches for three months a year) and remittances (perhaps as many as two out of ten Uruguayans live and work abroad, including a disproportionate number of young people and professionals trained in the sciences). It also benefits from a banking system that carefully guards the identity of depositors (hence the Swiss metaphor). A significant percentage of national income thus comes from Argentines and Brazilians, who have for years favored Montevideo as a safe haven for their liquid resources. The political culture of Uruguay is a curious hybrid—Italian masonry grafted onto Scandinavian social democracy, nostalgia for the Second Spanish Republic (1931–36), and a kind of Latin American Trotskyism. These ideologies have been brought to the country by successive waves of immigration and by an odd mixture of engagement with and isolation from Western Europe. Its social-democratic sensibility is obviously up to date by the standards of current Continental politics, though in fact it long predates them. In many ways Uruguay more nearly resembles France in the late 1940s, where both advanced political and economic notions and conservative (with a lower-case “c”) social customs commingled without difficulty. Insofar as Latin America is concerned, the Cuban revolution—too far away to be appreciated first-hand—is still regarded in many quarters as an event worthy of emulation, although its failure is evident to everyone else. The candidate of the Left in the 1999 presidential elections, Tabare´ Va´squez, even closed his final campaign rallies with the highly evocative phrase of Che Guevara, “ever onward towards victory” (hasta la victoria siempre). Uruguay’s continuous flirtation with left-wing ideas has remained largely platonic: it is too small and too dependent upon its neighbors and upon the international financial community to embark on extravagant ideological adventures. Perhaps this very fact tends to encourage some left-wing play-acting in national politics, since everybody knows that in the final analysis things in Uruguay are bound to remain pretty much the same. This much was proven in national elections late last year when even Tabare´ 430

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The Southern Cone Va´squez promised nervous Argentines and Brazilians that he would maintain the secrecy of their numbered bank accounts. In the event, he received a perilously high score in the first round (just under 50 percent) and many predicted that he was bound to win the runoff because the country’s two major parties—the Colorados and the Blancos—were incapable of putting aside their differences and uniting behind a single candidate. Those who so calculated were proven wrong when the Blancos, who had come in third place, threw their support to the Colorado candidate, who was the son of a former president and the great-nephew of President Battle y Ordo´n˜ez. If nothing else, the election proved that despite their apparent lack of economic sophistication Uruguayans are too sensible to push their country off a cliff. Even more than Argentina, Uruguay’s future depends upon Mercosur, and very specifically upon the economic fortunes of Brazil. Montevideo is now the center of the Mercosur secretariat and presumably could become the Brussels of a larger federation if the Brazilians succeed in courting other states—Chile, Peru, Bolivia, maybe even Venezuela—to become members. Meanwhile, Uruguay’s somewhat shabby-genteel democratic society survives, dependent upon its neighbors and at the same time determined to preserve its own distinctive identity. Why Should the United States Pay Attention? The fact that the principal external economic actors in the Southern Cone republics are generally countries other than the United States has not isolated them from the worldwide trend towards Americanization in dress, food preferences, films, television programs, popular music, and lifestyles. Miami, New York, and Washington have become obligatory ports of call, and many travelers are now discovering points farther afield. After years of maintaining their monopoly on English, the tiny British communities that used to supply the language teachers throughout the Cone have been forced to cede most of their terrain to the American English spoken in most of the world. Paradoxically, while Brazilian economic influence is significant in countries such as Argentina and Uruguay (and perhaps even dominant in Paraguay), and even though the political elites of all the countries of the region profess a greater sympathy for Mercosur than any equivalent arrangement with the United States, there is little or no interest in anything Brazilian except popular music or an occasional excursion to a Brazilian beach. For its part, Brazil has to defend itself from the same Americanizing influences as its neighbors, with the important difference that U.S. investment in Brazil is growing far faster than anywhere else in South America, with political consequences yet to be determined. The Southern Cone therefore remains to a remarkable degree terra incognita. Its relationship with the United States is growing, but other facSummer 2000

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FALCOFF tors—particularly economic geography— continue to place it outside of Washington’s primary sphere of Latin American influence. There is no particular reason to regret the fact, but it does pose new and more subtle challenges to American business and American foreign policy. How well can the United States perform in areas of secondary (but still not insignificant) economic importance? To what degree do geopolitics still matter in determining foreign policy priorities? Should a region that is gradually converging with the United States in “soft” factors of power such as culture and consumer patterns be encouraged and welcomed into our sphere of influence, or should it be ignored or neglected? Can we learn to cultivate good relations with countries with which we coincide on many international trade issues, particularly vis-a`-vis the European Union, which aspires to outflank the United States? In some ways these are very old questions, posed in a new manner. They deserve some thoughtful answers.

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